Cap on rollover CGT exemption – NR individuals impacted

Exemption from LTCGT on Sale of Residential House

 Section 54 provided exemption from long term capital gains tax for gains realised upon sale of residential house if such gains were used to purchase another residential house in India within 12 months prior or two years after the sale or construction of another residential house within 3 years of sale. Currently there is no limit on the amount of capital gains which would be exempt under this provision.

Exemption from LTCG on sale of any long-term capital asset

 Section 54F exempts an individual and HUF (including NR, NRI) from capital gains tax if the individual or HUF invests the sale consideration received on sale of any other long term capital asset in a new residential house if purchased within 12 months before or 2 years after the sale or constructed within 3 years after the sale

The proposed Cap

It is now proposed to restrict the exemption under S. 54 to the gains of INR 10 cr on residential house. Gains more than 10 cr, even if used for new residential house, will now be taxed. The exemption of LTCG tax under S.54F is also proposed to be capped at INR 10 cr on sale of LT Capital asset even if the investment in new residential house is more than 10 cr.

Representations are made to remove this restriction under S. 54 for residential property since genuine cases would suffer in this case.

 Both these changes are effective from FY 2023-24 (AY 2024-25)